Location and scale
| English | Chinese | Pinyin |
|---|---|---|
| location | 选址 | xuǎn zhǐ |
| scale | 规模 | guī mó |
| infrastructure | 基础设施 | jī chǔ shè shī |
| incentives | 激励 | jī lì |
| economies of scale | 规模经济 | guī mó jīng jì |
| offshoring | 离岸外包 | lí àn wài bāo |
Where to set up shop
- Two identical businesses can thrive or fail purely on where they locate.
- Choosing a location 选址 — and the right scale 规模 of operation — is a major strategic decision.
Location factor lab
Classify why a business chooses one site over another.
For a high-street retailer, the most important location factor is usually:
Retailers need footfall — closeness to customers.
Which are location factors? (Select all that apply.)
Costs, infrastructure and incentives matter; the last does not.
Factors affecting location
- Costs: land, labour, transport.
- Market: closeness to customers (vital for retail).
- Materials and labour supply, infrastructure 基础设施, and government incentives 激励.
A location decision weighs quantitative factors like cost against qualitative ones like nearness to customers
The optimum scale is the output with the lowest average cost
Operating at a larger scale can unlock:
Larger scale lowers average cost through economies of scale.
The maximum output a business is set up to produce is its ______ of operation.
Scale links closely to economies of scale.
The scale of operation
- Scale is the maximum output a business is set up to produce.
- A larger scale unlocks economies of scale 规模经济 — but demands heavy investment and steady demand.
Worked example. A steel maker locates near a port and raw materials to cut transport costs; a coffee shop locates on a busy high street near its customers. The best location depends on the business.
Offshoring can cut costs but adds risks of distance, culture and control.
Locating abroad trades cost savings for added complexity.
Globalisation and location
- Firms increasingly locate offshore to cut costs or reach new markets.
- This is relocation/offshoring 离岸外包 — powerful, but it brings risks of distance, culture and control.
You've got it
- location factors: costs, market, materials, labour, infrastructure, incentives
- scale = maximum set-up output; larger scale unlocks economies of scale
- firms may offshore to cut costs or reach markets, accepting distance/control risks